Tuesday, 23 December 2014

2015 will be a major game changer year for the power sector

The Coal Controller's office tucked inside a British Raj era building at 1 Council House Street in Kolkata would surely be busy this New Year. The office that received a communique from the ministry mid-December have been directed to start collecting penalties on coal extracted till date right away from the owners of the de-allocated mines.

"The progress of collection may be informed by first week of January," the letter addressed to coal controller Amrit Acharya said, referring to the decision of the Supreme Court that imposed the "additional levy".

That penalty which needs to be paid up works out to about Rs 997 crore for a modest power player like CESC to about Rs 1,793 crore for bigger corporate entities that have already expressed their inability to pay up on the coals used. Private sector power producers surely won't be celebrating this New Year in a grand way.

A few blocks north of Council House Street, R Mohan Das, human resource director at Coal India has been busy meeting union leaders to keep them from going into a week-long strike in protest against government's disinvestment plan, which is reportedly been deferred due to stock market volatilities.

The strike, slated for January 6, could derail the world's largest coal miner's plan to produce 507 million tonnes, not to speak of a minor embarrassment to the power minister, Piyush Goyal, who promises Coal India output to double to 1 billion tonnes by 2019.

But there's hope. A 10-minute drive from Coal India's head office through Council House street southward, SK Tripathi, head of public sector MSTC Ltd, is fine tuning the e-auction platform that would go live soon. He is pre-occupied testing systems through mock deals and ensuring the IT systems have no glitches before actually undertaking the mammoth and unprecedented effort to auction off most of the 204 mines, de-allocated earlier by the Supreme Court, beginning in March 2015.

The Year 2015 would be like no other for the power sector.

"The biggest game changer for the power sector in 2015 will be the coal block auction," says Ashok Khurana, director general of Association of Power Producers. The private sector is reasonably happy with how the guidelines and modalities for the e-auction are shaping up though there were heartburns over the de-allocation suffered due to the policy action of the government and the penalty imposed by the apex court. Some had gone to the Supreme Court with review petitions, all of which were rejected.

But most power producers have taken all it in their stride.

"While a review as well as interim petitions were filed, we are reasonably satisfied with how the e-auction is shaping up and plan to participate to get back the mines that we have lost," said Sandeep Jajodia, chairman and managing director of Monnet Ispat and Power. Even as promoters of coal-fired power plants are eagerly awaiting the auction, the gas-based units too want a major push from the government that would help restart their stranded units due to lack of domestic availability of gas and high prices of imports.

Ideas like gas-pooling, spinning reserve and taking recourse to clean energy fund are being brainstormed jointly by the power and natural gas ministries.

"We expect the issues confronting the gas-based power sector getting resolved to a large extent in the next 5-6 months unlocking about 10,000 mega-watt of idle power capacities," said Sambitosh Mohapatra, partner, power and utilities, PricewaterhouseCoopers.

Execution of the e-auction of mines, finding solution to the woes of gas-based plants and likely resolution of compensatory tariff for power plants based on imported coal are some of the things which will give the power sector a new beginning in 2015, believes Sambitosh. "We would see most of the pieces of the jigsaw puzzle being put in place during the year," he said.